DENVER (KDVR) — With high inflation and rising interest rates, many Coloradans are wondering where they should be keeping their cash right now.
According to the founder and editor of DepositAccounts.com, it all depends on what you’re keeping cash for.
Is it for an emergency fund? Or something more long-term?
Experts tell the Problem Solvers: with emergency funds you have to be reasonable with your expectations, like understanding it likely won’t keep up with inflation — especially in today’s world.
But according to DepositAccounts.com, there are steps you can take to maximize your rate of return all while keeping it safe, keeping it liquid and keeping it someplace where it can help you in case you need it.
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One suggestion is to use an FDIC-insured bank where the average interest rate for a savings account is around .06%.
Experts say you can do even better by keeping it in an online savings account, which would provide you with an interest rate that’s eight times that amount.
“No extra risk, very convenient; you can just link it to your checking account so you can keep your emergency funds separate from your checking account, keep it very liquid; you can quickly transfer it back to your checking account when you need to,” said Ken Tumin, founder and editor of DepositAccounts.com.
When the Federal Reserve starts hiking rates up soon, you’ll be glad you chose an online savings account — since they’re proven to keep up with the fed a lot more than brick and mortar banks do.
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When it comes to keeping your cash someplace for non-emergency options, there are several options to choose from.
According to Tumin, you can earn a little more with a CD — Certificate of Deposit — than you would in a savings account, but they’re best when interest rates are plateauing or maybe going down; not so much when they’re about to go up.
Tumin also says Series I Savings Bonds are also a great deal because they’re indexed with inflation, but you can only contribute $10,000 a year.
“Another option to consider that’s fairly new is what’s called a high-yield checking account. Hundreds of small banks and credit unions across the nation offer these. And what they do is they offer a high rate. Often higher than what you can get than an online savings account. But there are two catches: One, it’s usually capped to a small balance like $5,000 to $25,000,” he said.
Second catch: they require monthly activity, mainly debit card usage every month in order to qualify for a higher rate.
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The Problem Solvers were curious to know where a financial expert like Tumin keeps his money these days.
“For short term: I do have a lot in banks and I do have a lot in I-Bonds. For the longer term it’s index mutual funds. Low-cost index mutual funds is good for the long term,” Tumin replied.
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